GeneDx Surges Past Q2 Expectations,
Sets Up for Strong Year-End Growth

GeneDx Holdings Corp. (WGS) is a precision diagnostics company specializing in advanced exome and genome testing, powered by a proprietary and rapidly expanding dataset of rare diseases. Its services are primarily targeted at pediatric outpatient and neonatal ICU settings, with broader market opportunities emerging. The recent endorsement by the American Academy of Pediatrics (AAP) recommending exome and genome sequencing as first-tier tests for children with developmental delays or intellectual disabilities is expected to drive sustained demand starting in 2026.

This quarterly update reviews the Q2 2025 results. For detailed background, you may refer to our prior publications:

The second quarter results were outstanding across all key metrics. The first quarter issue of sequentially declining test volumes was addressed as sequential growth resumed. The underlying fundamentals of the business remain strong, and the second quarter results bear that out.

GeneDx delivered a strong second quarter, reporting revenue of $102.7 million versus expectations of $85.6 million. Whole Exome and Genome (WEG) segment revenue grew 69% Y/Y. Non-GAAP EPS came in at $0.50, well above the $0.11 consensus.

Revenue guidance for 2025 was raised by over 10% to $400–$415 million, up from $360–$375 million.

Revenue growth was supported by both WEG testing volume growth and a higher average selling price (ASP).

The company’s sustained effort to reduce claim denial rates — down to 45% from 47% in Q1 — contributed to a 32% Y/Y increase in reimbursement per test to $3,718. A large portion of payer denials occurs due to process and procedural errors, including coding errors and lagging updates in healthcare coverage systems, and directly impacts revenues. The denial rate can improve further in the second half, though new service offerings, which experience higher denial rates initially, can slow down the pace in the near-term.

ASP gains were also driven by improved reimbursement rates within both the commercial and Medicaid payers, who are recognizing the value of WEG testing and enhancing the coverage.

In addition, new offerings from GeneDx, including the rapid turnaround service and newer indications, have higher price points that also contributed to ASP improvement.

In our last update, Market Misreads Test Volume Dip; Overreaction Creates a Buying Opportunity, we had discussed why a modest decline in testing volumes will not be a harbinger of lower volume growth for the year.

During the second quarter, WEG testing volume grew by 28% over last year and 12% sequentially, mitigating the concern of a 1% sequential dip in the first quarter.

The company reaffirmed its goal of at least 30% WEG volume growth in 2025. If any concerns linger after the second quarter report, it can be whether the company will be able to meet this volume growth target and potentially grow it further.

Testing volume grew by a little over 26% in the first half. To achieve a full-year growth of 30%, volumes in the second half will have to grow by 33%. Given the seasonally stronger second half, a higher growth rate is very likely.

Besides the momentum in the core pediatric neurology business, the company's expanded service offerings will begin to offer incremental growth in the second half that will layer on to the core business. These include expanded indications like cerebral palsy; opportunities in NICU; and, to a smaller extent, the general pediatric opportunity following the AAP guidance.

Integration with the widely used Epic healthcare record system within hospitals remains on track and is building momentum. After 3 systems went live at hospital groups in the first half, the company expects the count to increase to 12 systems in the second half, which will then have the critical mass to reach an annual run rate of a few thousand tests in NICU during the fourth quarter.

The company continues to expand its Medicaid coverage to new states for outpatient and inpatient testing. The potential testing opportunity from newly added states provides further incremental opportunities in the second half.

Based on the business momentum and additional growth vectors, we anticipate the company is well-positioned to meet and exceed the 2025 volume growth guidance. If this issue pressures the stock price, it can be considered a buying opportunity.

GeneDx continues to differentiate through the scale and effectiveness of its unique rare disease dataset and interpretation engine. Its push into interpretation-as-a-service could unlock a high-margin, scalable growth avenue, including international expansion. The company remains well-positioned in a growing market that values speed, quality, and data depth.

GeneDx will face growing competition as the genomic diagnostics market attracts new entrants. However, its robust and expanding database —comprising over 850,000 sequenced exomes and genomes — alongside its proprietary interpretation engine, offers a durable competitive moat rooted in data science and scale.

The stock trades at a premium, reflecting its high-growth profile. Consensus EPS estimates of $1.48 for 2025 and $2.17 for 2026 imply P/E multiples of 73x and 42x, respectively. While these projections may prove conservative, such high valuations can amplify share price volatility, especially for a momentum-driven turnaround story.

Given its premium multiple, GeneDx is expected to execute nearly flawlessly each quarter to meet investor expectations. This adds pressure, particularly as sentiment and whisper numbers can shift quickly. Still, as a healthcare company with limited direct exposure to tariff and regulatory disruptions that are affecting the broader healthcare sector, GeneDx merits a valuation premium.

More than one-third of revenue — and a larger share of volume — comes from Medicaid. Although the company’s service offerings, which reduce the cost burden on the healthcare system, have so far shielded it from Medicaid-related disruptions, any shifts in funding or policy remain a watch point.

Investor concerns — such as those around volume growth — have tended to be short-lived and presented buying opportunities for long-term holders.

Since initiating coverage in June 2024, GeneDx has steadily strengthened its market position and financial profile. Its inclusion in the Prudent Healthcare and Prudent Small Cap model portfolios in May 2024 (sub-$20 share price) has been validated by the performance.

The recent AAP recommendation marks a structural tailwind, as the market aligns further with the company's testing portfolio. Multiple growth opportunities, which will gain momentum in 2026, and a widening competitive moat from an expanding dataset, makes GeneDx an attractive company for the long term, and can potentially invite acquisition interest in the future. We believe the stock will continue to trend higher as it exceeds quarterly performance consistently.

As always, investors should conduct independent research and remain mindful of the risks inherent in small-cap growth investing.

(For context, the article was submitted for publication on Seeking Alpha on July 30, 2025)